The ACA and Medicaid Expansion Waivers

Under the Affordable Care Act (ACA), Medicaid plays a key role in efforts to reduce the number of uninsured by expanding eligibility to nearly all low income adults with incomes at or below 138% of the federal poverty level (FPL, $16,242 per year for an individual in 2015) with full federal financing for the first three years, gradually decreasing to 90% federal funding; however, the Supreme Court ruling on the ACA’s constitutionality effectively made the expansion a state option. According to CMS guidance, states cannot receive the enhanced federal funding for the ACA expansion unless they cover all newly eligible adults through 138% FPL; enrollment caps also are not permitted. As of November 2015, 31 states including DC have adopted the expansion, and nearly all are implementing the expansion as set forth by the law. A limited number of states have obtained or are seeking approval through Section 1115 waivers to implement the expansion in ways that extend beyond the flexibility provided by the law. In some cases, alternative models to implement expansion through waivers are seen as a politically viable way to extend coverage and capture enhanced federal matching funds for newly eligible adults. This brief provides an overview of the role of Section 1115 waivers in expanding coverage since the enactment of the ACA and highlights key themes in these waivers as well as highlights provisions that CMS has turned down.

To date, six states are currently implementing or planning to implement the Medicaid expansion through an approved Section 1115 Waiver (Arkansas, Iowa, Michigan, Indiana, New Hampshire, and Montana). New Hampshire will transition from a state plan amendment to a waiver in January, 2016, and expansion coverage in Montana will be effective in January, 2016. Pennsylvania had received waiver approval to implement the Medicaid expansion, but transitioned from a waiver to a state plan amendment in mid-2015, so Pennsylvania is not included in the discussion of current and pending waivers.

Two states currently have waiver proposals pending with CMS. Arizona implemented the expansion, but now has a waiver application pending with CMS seeking changes based on state law. Michigan has a pending waiver amendment seeking changes required by state law to continue its expansion after April 2016 (Table 1).

While the waivers are each unique, they include some common provisions. Common provisions approved to date include implementing the Medicaid expansion through a premium assistance model; charging premiums; eliminating non-emergency medical transportation, an otherwise required benefit; and using healthy behavior incentives to reduce premiums and/or co-payments. Indiana’s waiver approval included provisions that had not been approved in other states. These include allowing the state to waive retroactive eligibility (which was also later approved in New Hampshire); to make coverage effective beginning on the date of the first premium payment, rather than on the date of application; and to bar certain expansion adults from re-enrolling in coverage for six months if they are dis-enrolled for unpaid premiums (a lock-out of up to three months for certain expansion adults was later approved in Montana). In addition, under separate waiver authority (§1916(f)), Indiana received approval to charge higher cost-sharing than otherwise allowed under federal rules for non-emergency use of the emergency room. Also unique among the expansion waivers to date, Montana received approval to implement 12-month continuous eligibility for new adults to reduce the effects of churning between Medicaid and Marketplace coverage due to small changes in income (Table 1).

Table 1: Key Themes in Approved and Pending ACA Expansion Waivers

Approved Waivers

Pending Waivers

Waiver Provision

AR

IA*

MI

IN*

NH*

MT

MI*

AZ

Premium Assistance

QHP

ESI

ESI

QHP

QHP

Premiums / Monthly Contributions

X

X

X

X

X

X

X

Healthy Behavior Incentives

X

X

X

X

X

Waive Required Benefits (NEMT)

X

X

X

Reasonable Promptness

X

Waive Retroactive Eligibility

X

X

Co-payments Above Statutory Limits

X

X

X

12-Month Continuous Eligibility

X

Time limit on Coverage

X

X

Work Requirement

X

NOTES: * New Hampshire will transition from a SPA to a waiver in 2016. Cost-sharing waiver approved in IN under Section 1916(f), not Section 1115. IA has approval for mandatory QHP enrollment with premium assistance for new adults from 101-138% FPL but has a waiver amendment pending to instead require mandatory Medicaid managed care due to the loss of both QHPs. MI’s pending amendment would apply to beneficiaries from 101-138% FPL after 48 months of coverage; MI’s state legislation requires the Medicaid expansion to end on 4/30/16 if the new provisions are not approved by 12/31/15. PA transitioned from a waiver to a SPA in 2015 (so it is not included in the table).

SOURCE: KCMU analysis of waiver proposals.

CMS has denied a number of provisions included in Section 1115 Waiver proposals. CMS has denied waiver authority to include premiums for individuals with incomes under 100% FPL as a condition of eligibility; requirements to omit wrap-around benefits for Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) and free choice of family planning provider; and work requirements or incentives as a condition of Medicaid eligibility.

Looking ahead, additional states may consider waivers to implement or modify the expansion. There is no deadline for states to participate in the Medicaid expansion and moving into the legislative sessions for state fiscal year 2017, other states continue to explore opportunities to implement the Medicaid expansion. In addition, states may also consider using the new state innovation waiver authority (Section 1332) available in 2017, which will allow states to waive Marketplace coverage provisions and combine those waivers with Medicaid and CHIP waivers, although no state has yet released such a proposal.

Particularly as waiver designs become increasingly more complex, studying and assessing the effects of key waiver provisions will help inform policymakers about whether such policies can be effectively administered and whether beneficiaries understand the policies. Among the issues and waiver provisions to be studied are using Medicaid as premium assistance to purchase Marketplace coverage; imposing premiums and cost-sharing above federal limits; offering healthy behavior incentives; limiting non-emergency medical transportation; and adopting a mix of provisions in different waivers that interrupt, delay or extend effective coverage dates. It will be important to study these provisions for their impact on beneficiary access to care and in comparison to the Marketplace experience that people above poverty would fact if their state did not expand Medicaid. The ACA’s waiver transparency regulations require states to have a publicly available, approved evaluation strategy, and a federal contract has been awarded to evaluate a number of Section 1115 waivers.

Ensuring that evaluations are timely and that findings are publicly available will be important for enabling researchers, policymakers, and other stakeholders to identify and examine lessons learned from these waiver experiences. As more states seek waivers to implement the expansion, what we learn from their experiences will help inform the future direction of coverage for low-income adults and families. CMS, states, and other stakeholders will continue to navigate the balance between state waiver requests in an effort to reduce the number of uninsured adults while preserving key beneficiary protections and requirements in the Medicaid program.